2017/18 Bermuda Budget Highlights

A year of threats and opportunities in an age of uncertainty

To eliminate the deficit, we must have a Government that is committed to stay the course and not be tempted to engage in costly adventures that may be politically popular but will ultimately impair Governments ability to fulfill its obligations to the people. - The Minister of Finance, The Hon. E.T. Richards, JP, MP

Summary Expenditure Government has aggressively focused on increasing revenues Operating expenses projected at $923.5M for 2017/18, down through actions such as tax reform and limiting concessions. 1% from last year Although the Government has attempted to reduce headcount Expected cost of Health Care, Public Education, Social Safety Net there continues to be pressure to increase expenditure in and National Security estimated at $523M for the next fiscal year critical areas such as education and social protection. Americas Cup budget for 2017/18 is $31.8M Capital expenditures of $67.5M, primarily for construction projects Revenue but also includes provision for major IT development, schools Forecast to rise by $57M in 2017/18 maintenance & roadworks Significant tax changes include: Interest on debt estimated at $124M, $2.5M higher than last year -R eforms of the Payroll Tax structure, with progressive taxation for employees Budget highlights: - I ncrease of tax cap to $900,000, with new top rate of 8.75% Actual Original Revised Estimate for those earning more than $235,000 and lower rate of 2015/16 estimate estimate 2017/18 4.75% for those earning less than $48,000 $M 2016/17 2016/17 $M -T op rate of Payroll Tax will increase to 11% in 2018/19, $M $M bottom rate will decrease to 4.25% -A graded system for employers payroll tax depending on Revenue 954 997 985 1,042 the size of the company and nature of activities; top rate increases to 10.25% Current account 902 922 932 923 -H armonisation of multiple customs duty tariff rates into expenditure fewer rates - F uel duty up 5 cents a litre, increases on tobacco and alcohol -G eneral Services Tax to be introduced in 2018/19 Interest on debt 116 129 122 124

The Ministers deficit reduction strategy has continued to focus primarily on tax increases as opposed to cost reductions. This is an increasingly risky strategy as the UK and US aim to reduce the cost of doing business. Paul Byrne, Partner, PwC Bermuda

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Growth and change are two realities that no business Partner Senior Manager can afford to ignore. PwC Bermudas Advisory & Private +1 (441) 299 7125 +1 (441) 299 7661 Company Services teams can help you take a more strategic paul.j.byrne@bm.pwc.com david.cartmill@bm.pwc.com approach to both. We provide a broad range of audit and advisory services. Our team understands private businesses and invests in building strong relationships.

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